Transcript Slide 1
How the developing world may participate in the global Internet Economy: Innovation driven by competition Rohan Samarajiva www.LIRNEasia.net; [email protected] Paris, 10 September 2009 What is the Internet? Is it this? And this only? Or is it a metamedium that allows one to engage in • Communication in multiple forms, synchronous/asynchronous, one-to-one/one-tomany, etc. • Information retrieval • Publication • Transactions (including payments), and • Remote computing?? And does using some of these functions over distance, using electronic means, constitute participation in the Internet Economy? Poor are participating . . . . • If the answer is yes, millions of poor people in the IndoGangetic Plain are participating in the Internet Economy through the mobile phone – Inchoate, but understandable as services are just beginning to be offered & business models are being worked out What mobiles are used for (% of BOP mobile owners) 100% 80% 60% 40% 20% 0% Bangladesh Pakistan India Sri Lanka Philippines Thailand How were this many poor people connected electronically? • “Budget Telecom Network Model” that allowed South Asian telcos since 2005-06 to make excellent (if volatile) returns by serving “long-tail” markets of poor people by – Dramatically reducing transaction costs primarily through prepaid – Allowing poor people to pay for services when they need it and when they have money (as opposed to fixed monthly payments) – Controlling operating expenses through business-process innovation – Focusing on revenue-yielding minutes rather than ARPUs • Akin to Budget Airline Model that allows RyanAir to make profits while Alitalia flounders • Downsides – Patchy quality of service for consumers – Volatile returns; increased risks for suppliers Total cost of mobile ownership in 77 emerging economies Competition as the necessary condition • Despite being similar to Bangladesh, India, Pakistan and Sri Lanka, Nepal had high prices until 2009 – Backdoor entry to mobile space by “fixed” CDMA operators was the explanation for prices dropping in 2009 Source: http://lirneasia.net/projects/2008-2010/indicators-continued/benchmarks/ 18 16 14 12 10 8 6 4 2 0 40 35 30 25 20 15 10 5 0 2008 2007 2006 2005 2004 2003 2002 2001 Rural Indian SEC D and E mobile penetration 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 Mobile tariff (effective charge) Urban Indian SEC D and E mobile penetration % of population INR per minute Low prices greater participation by the poor (urban and rural) What lessons for broadband? • Lower prices require lower costs – Reduce international backhaul costs International is the bottleneck Prepaid sachet pricing for broadband • Same as with voice, poor people need to be able to pay when the need arises and when money becomes available • Broadband use in HSPA+ networks, where the relation between the base station and users is in any case not fixed is conducive to this form of pricing • Of course, sachet pricing can include “buckets” of minutes, MB, etc., and need not be seen as a taxi meter And of course, new services/applications must be available . . . CellBazaar Amazon Marketplace Dispute resolution Dispute resolution Feedback mechanism Feedback mechanism Delivery Delivery Payment Payment Order Order Search Search CellBazaar stages included Amazon Marketplace stages not included • Today CellBazaar can only do search; if payment policy firmed up they can move up What role for policy and regulation? • Restating the key point made by Levy and Spiller in 1994: solutions must fit the institutional conditions • Institutional conditions include the operative business model policy and regulation must support and leverage the business model, not work at cross purposes • The question then is what can policy and regulation do to leverage the “Budget Telecom Network Model”? Policy & regulation to leverage BTNM for public objectives • Market entry and spectrum management, including refarming, have to be given high priority • More emphasis on wholesale access to fat pipes than termination rates per se • Old style price regulation to be replaced by forms of forbearance, if necessary bounded to address competition concerns • Gentle on Quality of Service (QOS) regulation • Phase out universal-service levies